This blog is about struggles for the control of corporations. For the most part, I'll focus on public corporations headquartered in the United States, issuing securities according to the rules stipulated by the SEC in Washington and (typically) governing their affairs by the laws and judicial decisions of the state of Delaware.
My own prejudices are ... well, I think I'll let you work them out as we proceed day to day.

Monday, May 18, 2009

Glass Lewis supports Chemed nominees

One of the leading proxy advisory firms, Glass Lewis, says this morning it thinks Chemed shareholders should vote in favor of the comnpany's nominees for the board of directors at the annual meeting, scheduled for May 29.

Chemed, an Ohio-based company, is best known for its Roto-Rooter subsidiary, North America's largest provider of plumbing and drain cleaning services. But its main line of business is the Vitas Healthcare Corporation, which runs hospices in 12 states.

That seems an odd and arbitrary combination of businesses. These days the old-fashioned "conglomerate," where businesses with no connection to one another sheltered under a single corporate roof, is in disfavor. The general presumption is that there should be symmetry between or among the parts of the whole. After all, if I as an investor want to diversify my portfolio, I can do so myself. Why should the dversification be accomplished by the corporation rather than by the stockholder?

Anyway, that appears to be the reasoning of the dissidents, led by MMI Investments LP, a New York based hedge fund. They've urged shareholders to elect a new board of directors who would pursue a spin-off of one or the other of these two disparate lines.

Glass Lewis, though, says: "We see no reason to doubt the board's assertion that a separation of the company's ... businesses, while strategically compelling, is not advisable at this time due to market conditions. Furthermore, we have found that the Company's stock price has continued to outperform relevabnt indices in recent years."

On the stock price: Chemed stock trades on the NYSE under the ticker symbol CHE. Its price rose by approximately 7.4% during the two years beginning February 11, 2007. During those same two years, the S&P Small Cap 600 Health Services index declined by 28.1%, and the S&P 500 Index declined by 42%.